Bureaucratic hurdles blamed for weak investment in Pakistan

ISLAMABAD: Business representatives have said Pakistan’s investment slowdown is being driven less by a shortage of opportunities and more by administrative and structural barriers that continue to discourage both domestic and foreign investors.

Speaking on the issue, Mian Shafqat Ali, founder of the Pakistan Industrial and Traders Association Front, said foreign direct investment declined by 31% in the first 10 months of fiscal year 2025-26. He said inflows stood at $1.409 billion during the period, compared with $2.035 billion in the same span a year earlier.

Ali said the country was facing a worsening investment crisis and added that local and foreign investment had fallen to one of the lowest levels seen in recent years. According to him, the main problem is not the absence of potential but a system that discourages investors through repeated procedural obstacles.

Attributing the concerns to the business community, he said investors are affected by the environment in which they operate, and pointed to the legal and regulatory framework, shifting energy policies, exchange-rate volatility and ad hoc official decisions as factors that have created uncertainty.

"The real obstacle in the way of investment is the layers upon layers of bureaucratic hurdles. Without removing these barriers, the dream of increasing investment cannot be realised," Ali said.

Calls for structural reform

Many in the business community believe Pakistan could find better openings once the US-Israel-Iran conflict is fully settled. At the same time, they argue that the country must first address internal weaknesses in order to benefit from any such opportunities.

Lahore-based businessman Bilal Hanif said Pakistan had not been able to ensure the smooth movement of even Chinese investment despite repeatedly describing China as an especially close partner. He said new institutions and investment facilitation mechanisms had not produced meaningful change because the underlying issues remained unresolved.

"We keep building new institutions and launching new investment windows, but nothing changes on the ground because the real problem is structural. A foreign investor does not just look at your pitch; he looks at your court system, your tax regime, and whether rules will be the same two years from now. On all these counts, we are falling short," Hanif said.

Pakistan has averaged about $2 billion in annual foreign direct investment over the past 26 years. Expert bodies such as the Pakistan Business Council consider at least $12 billion a year, or around 3% of GDP, necessary to meet basic development benchmarks.

Regional economies including India, Vietnam, Indonesia and Bangladesh have drawn significantly larger inflows, helped by more predictable regulations, stronger investor safeguards and continuity in policymaking.

Ali said the problem should not be pinned on a single institution, including the Special Investment Facilitation Council, and instead reflected deeply rooted systems that make business activity in Pakistan more difficult than it should be.

"Until policymakers are willing to make difficult structural and political decisions, investment will remain weak, no matter how many new institutions are created," he warned.

Investors have consistently sought political stability, simpler regulations and assurance that policies will not be reversed. Frequent political disruptions, changes in leadership and policy inconsistency have undermined confidence in long-term investment decisions.

Ali urged the government to move beyond announcements and focus on broad-based reform, including changes to the regulatory framework, easier business registration, reliable energy supply at competitive prices and a stable policy environment.

"Government should move beyond announcements and focus on real structural reforms, overhauling the regulatory framework, simplifying business registration processes, ensuring energy availability at competitive rates and most importantly, providing a stable and consistent policy environment as without fixing the foundation, everything else is meaningless," he said.